Newsletter

Wednesday, December 19 2017

John Bollinger Commentary From December 2017 Newsletter

Currencies

Bitcoin and the other crypto-currencies are redefining the way we think about methods of storing and exchanging value. For millennia the precious metals and then the currencies based on them were the best/most liquid and fungible store of value. Gradually the world has moved to ever-greater levels of abstraction. The "modern" era might well be dated to start with the end of the gold standard, which marked a complete switch to fiat currencies backed by nation states, currencies that were only as good as the promise of the backer. Some worked well and some didn't, often spectacularly so, witness Rhodesia/Zimbabwe. Gold and silver still played roles, but increasingly less important, even marginal, ones.

Enter Satoshi Nakamoto, a purposely mysterious entity that introduced the idea of a currency based on a cryptographic process, Bitcoin. Along with the currency came a decentralized record keeping system, Blockchain. Together they ushered in a nascent revolution, the idea of a medium of exchange that was not government backed, one that stood on its own without external backing/promises. Where is all this going? No one knows for sure. But it does seem clear to me that we are seeing a revolution that will change the value store/exchange landscape in profound ways. Long-term change is in the air and I severely doubt that we'll revert to the old status quo. Sunday December 10th the CBOE, the Chicago Board Options Exchange launches futures on Bitcoin, and The CME, Chicago Mercantile Exchange, launches its version on December 18th. Welcome to the big top Bitcoin!

Blockchain is thriving too, the latest adoption announcement came from the Australian Stock Exchange, which plans to start clearing its trades via a Blockchain system.